"Texans must ask their *elected leaders* these 4 questions"

Yep. "Heads I win. Tails you lose."

Especially with how elected officials from
Texas (and other states) have acted about sending aid to blue states. And the whole “pull yourselves up by your bootstraps” mentality that seems to be prevalent.

In my idea world, the aid money would also go directly to the people who need it. Not to pay for those upgrades.

My stepbrothers and their families live in Cedar Rapids, IA and their area was hit very hard by the derecho last summer. I think the state did get some aid but not what they asked for or needed, but there was also not as much media coverage. I’m always curious where the aid money goes. My relatives didn’t personally get any help with costs to take away the trees that fell on their houses or yards. But I know that many people were houses I hotels and the city took away the trees that were left on the side of the road. Maybe the aid money helped put for that?

I truly feel for the people of Texas - but absolutely agree with your previous post that the Fed has to demand something in return for federal dollars about structural changes. There are still way, way too many people in Texas who want the aid and the ability to continue their fu to reasonable regulations that every other state has implemented and that every other citizen pays for directly with their utility bills. At point there was talk of FEMA  money going to pay the insane electric bills to those on wholesale plans. Hell to the no. The power companies can eat it considering how thoroughly and colossally they failed their customers.

Exposing retail customers to $9/kwh prices was always going to be a disaster.

When wholesale rates are low (which is most of the time) the customers make out like bandits and feel really smart.

When wholesale rates are high - in an emergency - customers will whine and complain and be unable to pay their bills anyway.

So, what's the point again of exposing them to wholesale prices?

The idea is supposed to be, when power prices go up, they'll conserve energy. But the problem is MOST retail customers are NOT on wholeale rates. They're on fixed price (higher than NORMAL wholesale) rates. So they will keep using and keeping power prices high. Meanwhile those who ARE ON wholesale rates can't cut usage to zero because IT'S ELECTRICITY - which is necessary for many parts of life.

Bad idea all around. Should never have been allowed by the PUC.

Here come the FEDS to the rescue.

It's not SOSHULIZM when it helps ME!

"Wholesale rate-based plans “can be tantalizing to consumers when the sales emphasis is placed on the possibility of very low rates during times of pleasant weather,” he said. “But they can be financially devastating when harsh hot or cold weather creates scarcity in the wholesale energy market.”

As a rule, the PUC encourages fixed-rate plans, he said. Those plans “may not offer the super-low pleasant-weather prices that are so attractive with those other plans,” he said, “but they moderate risk throughout all seasons.”...

While the PUC cannot offer financial relief for the consumers hit with astronomical bills, Texans can check with the Texas Department of Housing and Community Affairs, which recently received a federal block grant that includes some relief funding for utility bills."

www.dallasnews.com/business/2021/02/20/griddy-customers-face-5000-bills-for-5-freezing-days-in-texas/

So instead of that money going to help the poorest - it will help many who gambled on wholesale power prices and lost - while heating their large homes.

While gas and power producers made bank and can now afford even more toys and goodies on the backs of the low- and middle-income worker.

Sweet!

"But for oil and gas producers that have managed to keep production going, this is proving to be a big payday. Jerry Jones, the billionaire owner of the Dallas Cowboys, appears to be one of the beneficiaries.

Comstock Resources Inc., a shale driller that operates in Texas and Louisiana, told investors on an earnings call this week that the surge in natural gas prices was providing it with a major — albeit almost certainly temporary — financial boost. The company is publicly traded but Jones holds a majority of the shares.

"Obviously, this week is like hitting the jackpot," President and Chief Financial Officer Roland Burns said Wednesday. "

www.npr.org/sections/live-updates-winter-storms-2021/2021/02/18/969074414/jerry-jones-company-hits-jackpot-as-harsh-storms-send-natural-gas-prices-surging

Billionaires gonna billionaire.

I'm not sure Griddy is the biggest part of the problem or that it should bear the brunt of the blame for this fiasco.

IIRC from other reports I've seen (and if someone know otherwise, please correct me), Griddy makes its money from a monthly "membership" fee that allows customers to access electricity at the wholesale rate. Griddy does not make more money just because prices go up, nor does it make less when prices go down. It is a set fee per month. The increase in prices goes directly to the electric wholesaler providing the electricity; they are the ones making the insane amount of money.

In fact, Griddy saw this coming, and it advised its customers to change to fixed rate plans instead of the Griddy wholesale plans. However, the fixed rate plans were not accepting new customers as the freeze began. Why? Because the fixed rate plans need approval to increase the rates they charge customers, but they still have to pay the wholesale rate for the electricity from the wholesalers. Allowing customers to switch to the fixed plan when prices were increasing at astronomical rate would just transfer the high cost of electricity from the Griddy customer to the fixed rate plan.

This description may be an oversimplification.  There are generally a lot of variables in these kinds of situations, but I think this is a good recap of what I was reading this week.

I think a good analogy for the position the Griddy customers were in would be health insurance and pre-existing conditions before ACA. If you had no insurance and were diagnosed with cancer, you couldn't sign up for health insurance after the fact and transfer the cost of your treatments to the new insurance company. The financial model for insurance assumed that the premiums you paid during your healthy years would make up for the claims you made in your unhealthy years (along with all the payments made by customers who never made any claims at all), and most insurance companies were subject to rules that required them to reserve a certain portion of those premiums for future claims.


With the standard rate electric plans, you pay more than the typical wholesale rate (with an overall cap approved by the government which prevents payments from going above a certain amount). The difference between the wholesale rate and the rate billed to customers provides a healthy profit to the electric company, and they should be reserving some of that to hedge against emergencies when wholesale prices increase to an amount that exceeds the cap. It is understandable why they did not want to accept last minute switches from Griddy customers who had never paid the billing rate but suddenly want to take advantage of the situation to avoid the skyrocketing wholesale rate.

And honestly, I'm not sure why this is such a surprise.  There were huge spikes in energy rates for Griddy customers in August 2019, although not as high as during the current freeze. However, that August 2019 event should have been a huge red flag to anyone hoping to save money through Griddy.  The linked article seems to support the statements I made above regarding how Griddy makes its money.

What I don’t understand is why PUC gets to have an emergency meeting the night before the storm hits to jack up prices to these astronomical rates. I understand supply and demand, but demand for energy was not going to be reduced in this case - people needed their power on. Does it cost more for the producers to make power in extreme conditions? The cynic in me feels that the system is set up to gouge customers who are relying on a public utility to protect their lives and property.

Yes. When gas prices shoot up (which they did) - natural gas generation shoots up too.




Because the underlying nat gas prices were going through the roof. So generators weren't offering generation because they'd be getting back less in wholesale power prices (at the lower cap) than it cost them to generate that power using their generators' heat rate curves * the price of gas at the lower cap.

There was about 60,000 MW of gas in the plan for these crucial days. But they lost about 28,000 of it - for various reasons - some due to physics, some due to fuel issues, but some due to the generation being out of the money. So ERCOT had to raise the cap so that the generation could come into the market and be paid higher prices since they were getting charged higher prices by the gas generators/transmission companies.

Hmmmph. Add public utilities to the list of things I don’t think should be run at a profit. This is basic infrastructure these days.